By Kira Nickerson Stakeholder pensions are sexist and will leave hundreds of thousands of ret...
By Kira Nickerson
Stakeholder pensions are sexist and will leave hundreds of thousands of retiring women disadvantaged compared to their male counterparts, according to former labour MP Oonagh McDonald, a retirement income reform campaigner.
McDonald argued that as stakeholder pensions take off in the work place the move towards money purchase schemes is likely to increase. This, she said, will lead to a widening gap between the annuity income women receive as compared to men.
She said: "The Retirement Income Reform Campaign has calculated that more than 500,000 working women aged 35 and over will eventually suffer lower annual retirement income than men because of the sex discrimination implicit in the current annuities regime."
As such McDonald has written to the Equal Opportunities Commission about her concerns surrounding her perception of inequality in stakeholder.
She argued stakeholder will lead to the death of defined benefit schemes, under which women are treated equally to men on retirement compared to the defined contribution schemes, which encompasses the existing compulsory annuity purchase regime. Under the existing annuity regime women receive less yearly retirement income than men, McDonald said.
For example, using some of the best annuity rates available today, based on a pension fund of £100,000, a male aged 65 could receive an annual income £9,097 from a Legal & General annuity.
The best rate, using the same calculation based on a pension fund of £100,000, for a woman aged 65, offered by Sun Life would provide an income of £8,202.
McDonald said: "For a level annuity a woman will receive £17.21 less a week than a man for the same fund."
This is due to the calculations of an annuity being based on mortality rates and the longer life span of women.
She said: "Equal pension rights between sexes are an integral part of occupational and state pension provision. Such rights were hard fought and hard won.
"The stakeholder pension, with its requirement, after the option of taking a limited tax free lump sum, to use pensions savings to purchase an individual annuity, constitutes a retrograde step.
"Sex discrimination has always been a feature of annuities market in operation, although in past years only a minority of (mostly more wealthy) pensioners used the annuities market.
"However, with stakeholder likely to be so much the greater part of overall pension savings in the years to come, the question now arises whether it is just to oblige women to sink their pensions savings into a product guaranteed to provide them with a smaller income each year than would be provided to a man with equal pension savings."
McDonald suggested the Government could have adopted unisex annuities for stakeholder pensions or could make much needed changes to the existing annuity regime.
The Retirement Income Reform Campaign was founded in 2000 to seek reform of the rules requiring pensioners compulsorily to buy an annuity when they reach the age of 75. The campaign believes that pensioners should only be obliged to buy a mini annuity to give them a minimum retirement income, allowing them to spend the rest of their money where they want.
In last week's Investment Week, the stakeholder employer access flow chart, which was sourced by Scottish Life, was mistakenly reprinted with the yes's and no's in the wrong place. The correct version is reprinted here.
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